So Long 2017

In the News   Presented by Prairie Title  

December 21, 2017

         

Closing a Volatile Year

As 2017 comes to a close, I am hard pressed to think of a year in my lifetime that witnessed so much Washington-based controvery since Vietnam coupled with Watergate. Front and center on my mind at the end of a tumultuous year is that state of the real estate economy and just how much real estate impacts the U.S. economy as a whole. 

An interesting piece in Mortgage Professional America recently spoke of the benefits to the real estate economy if a home purchase tax credit were adopted, and a statistical note in the article really stood out to me: “According to the Bureau of Economic Analysis, the GDP reached $18.6 trillion in 2016. Of this amount, real estate chipped in $2.48 trillion, or 13.3 percent. In comparison, manufacturing was worth $2.18 trillion, retail contributed $1.1 trillion, and lawyers produced services worth $245 billion."

Clearly, the need to promote real estate transactions through the tax code is imperative. Thankfuly, the tax bill just passed in Congress ended up being less unfavorable to real estate than previous versions. Some deductibility for property taxes was maintained and the mortgage interest deduction was largely preserved, while capital gains treatment on the sale of a primary residence was  preserved. Commercial real estate also should benefit as pass-through entities such as LLCs will be treated more favorably in the new tax environment.

For my part, I am keeping an open mind on the possibilities for the real estate market as the new tax laws come into greater focus during 2018. 

CFPB Follies. There’s no need to discuss the spectacle of the agency temporarily having two diretors, but there has been movement onTRID disclosures since we last published.

On Dec. 6, CFPB issued an updated version of the TRID Guide to the Loan Estimate and Closing Disclosure forms, which did not really help solve disclosure issues. More hopefully, there is some momentum behind a bipartisan effort in Congress to legislate needed changes to the disclosure rule. We hope the new year will bring good news in this arena.

Finally, We recently saw Mudbound, an early 2017 movie release set in post World War II Mississippi. While I enjoyed the entire movie, one scene struck me as it unfolded: A family arrives at a home they believe they have rented (and indeed put $100 down on, quite a sum in those days) only to find that the homeowner has sold the home in the interim and they are out their money. The renter had made the deal on a handshake, with no paperwork, and unfortunately paid the price for that mistake.

To me, the scene was a reminder that real estate fraud has always been and always will be with us, and the need for vigilance to guard against fraud and theft remains and grows greater every day.

Taxes, TRID, and Cyber Threats

In the News   Presented by Prairie Title  

November 13, 2017

         

The Tax Plan Cometh

We have to address the elephant in the room: tax code changes and their effect on housing in 2018 and beyond. First, NAR reports that next year could see an increase in existing home sales due to an improving economy, job growth and rising confidence; however, it will be limited by continued supply shortages. NAR forecasts home sales will grow to 5.67 million in 2018, the highest point since 2006.

But, and this is a big but,  NAR also predicts that if the House tax bill or a similar version becomes law, it could act as a disincentive to homeownership and hold back strong sales activity.

NAR explains that the House tax bill could affect home sales and even home prices in 2018 and beyond, claiming that in its current form, the bill is a direct tax hike on homeowners. NAR’s analysis of the bill estimates it would cause home values to drop 10% and raise taxes on middle-income earners by an average of $815

On the bright side, Senate Republicans last week weighed in with a tax plan that would preserve the mortgage interest deduction.

We’ll see what happens over the next few months. I am very skeptical that slashing the mortgage interest deduction will have anything but a negative effect on the housing market. Let’s hope that doesn’t happen. I encourage all you to contact your representative in Congress and push to preserve the deduction.

Automation will fix TRID? The CFPB has published its final TRID amendments which, as expected, did nothing to fix the issues with fee disclosures (particularly title insurance) on the Closing Disclosure form. Beyond that, we don’t know what the future holds for CFPB as the court case challenging its constitutionality (PHH vs. CFPB) continues, the Republican Congress seems determined to de-fang if not eliminate it and Director Cordray’s term expires in June.

There is some bipartisan movement on the issue in Congress that is worth watching, but a tantalizing question is whether technology will help cure the problems in the long run regardless of what happens in Washington. A technology expert recently made just that case in Scotsman Guide. On related note, NAR recently published a good explanation of blockchain technology and its coming impact on the real estate market.

The scamming crisis. Hackers continue to scam homebuyers out of millions and it’s getting worse. I urge you to read this excellent summary of the situation by real estate writer Ken Harney, and pass the warning along to your staff and customers.

What’s your point of view? Call or email me, or write a comment here. Let’s keep the conversation going.